If you’re an income investor, chances are you like having dividend stocks in your portfolio with dividends that grow rapidly over time. But not all dividend stocks show substantial dividend growth. It takes continued earnings growth for a company to continue increasing its dividend without running into trouble paying its shareholders.
Take a look at three real estate investment trusts (REITs) that have posted stellar dividend growth over the past five years, putting them ahead of other REITs in that regard:
CTO Real Estate Growth Inc. (NYSE: CTO) is a diversified REIT based in Daytona Beach, Florida that owns and operates 23 retail, office and mixed-use properties. Of the 23 homes, 15 are multi-tenant and 8 are single-tenant. The rented occupancy rate as at 31 March was 93.5%.
In August 2018, CTO Realty paid a nominal quarterly dividend of just $0.016 per share. But over the next 10 quarters, it raised its dividend eight times to $0.3943 in March 2021. CTO Realty then cut the dividend to $0.333, but has since raised it three times to its current $0.38 per share. That’s an increase of 2,364% in less than five years.
On April 27, CTO Realty reported its operating expenses for the first quarter. Funds from operations (FFO) of $0.43 per share was significantly higher than $0.16 in the first quarter of 2022. Revenue of $24.72 million was 42.62% higher than revenue of $17.21 million in the first quarter of 2022.
While that’s impressive growth in both revenue and dividends, one caveat right now is that CTO Realty’s Core FFO 2023 guidance is $1.50 to $1.55. The $1.52 annual dividend gives CTO Realty an FFO payout ratio of nearly 100%. At best, it probably won’t raise dividends again any time soon, and at worst, another dividend cut is possible if the FFO declines in future quarters.
At this point, the excellent Q1 results and dividend yield of 9.5% are both positives for CTO Realty going forward.
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Innovative Industrial Properties Inc. (NYSE: IIPR) is a diversified/industrial REIT based in Park City, Utah that specializes in triple-net commercial real estate leases and leasebacks with cannabis companies as sole tenants.
As of December 31, 2022, Innovative Industrial Properties owned 110 properties in 19 states. The average lease term is 15.5 years. The property mix is ​​91% industrial, 3% retail and 6% industrial/retail.
Five years ago, Innovative Industrial paid a quarterly dividend of $0.25 per share. But since then, the dividend has increased 13 times and stands at $1.80 per share. That is an increase of 620% in five years.
There is one caveat with Innovative Industrial: the stock is quite volatile. Over the past five years, the stock has risen from $26 to $263 before falling to its current level of nearly $68. Innovative Industrial has a dividend yield of 10.62% and a payout ratio of 88.4%. While this REIT has performed extremely well, its volatility may not be well suited to more conservative income investors.
American houses 4 rent (NYSE: AMH) is a Calabasas, California-based residential REIT focused on the acquisition, development, renovation and rental of both used and new single-family and rental properties. American Homes 4 Rent started in 2012 and over 11 years has built a portfolio of 57,878 single-family homes in 21 states. The largest concentration of housing is in the southeastern US, where population growth has been explosive. The initial public offering (IPO) was in July 2013.
Since May 2018, American Homes 4 Rent has increased its dividend three times, from $0.05 initially to $0.22 per share. That’s a 340% increase in five years with no suspensions or cuts – even during the worst of the COVID-19 pandemic.
On May 4, American Homes 4 Rent presented its first quarter operating results. FFO of $0.41 per share beat estimates by a penny and was a 7.89% increase from FFO of $0.38 in Q1 2022. Revenue of $397.7 million beat consensus estimate of $390.57 million and was an 11.68% increase from revenue of $356.11 million in the first quarter of 2022.
The annual dividend of $0.88 per share is well covered with a 55% FFO payout ratio. Although American Homes 4 Rent’s dividend yield is only 2.66%, its dividend growth and earnings remain impressive.
Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by about 50%. Check out Benzinga’s Real Estate Offering Screener to discover the latest passive real estate investments.
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This article 3 REITS with the Best Dividend Growth Rates Over the Last 5 Years originally appeared on Benzinga.com
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